Economic Thought Before Adam Smith: An Austrian Perspective on the History of Economic Thought, Volume 1

Sunday, October 1, 1995

Libertarian theory did not emerge from a vacuum. Yet, often it seems that the deepest antecedents that movement libertarians would bequeath to us lie in the Enlightenment. Indeed, some would not proceed backward past Ayn Rand. The truth is, libertarian thought has an ancestry extending down through the ages to antiquity. To be specific, those roots are both Western and Christian. There can be no clearer exposition of this fact than the last major work of Murray Rothbard.

Economic Thought Before Adam Smith is a deceptively titled volume. It is actually a full-blown history of ideas from a natural rights-natural law perspective in philosophy as well as a critique of economic doctrine and theory from within the Misesian paradigm of mainstream Austrian economics. Professor Rothbard’s treatment is a thorough overview of the roots of the libertarian system that informed his life’s work.

This book is all the more valuable for Rothbard’s general approach to historiography. Working through the Austrian paradigm, Rothbard delivers a devastating blow to the standard chronology of economic theory as a linear and correct development from Adam Smith to modern neoclassical economics.

As the title implies, there was a wealth of analysis developed before the time of Adam Smith. Although most was imbedded in moral theology or appeared in fragments, a body of sound economic thought existed, much emerging from Thomistic Scholasticism. One of the most impressive examples of advanced theoretical contributions was the fourteenth-century French philosopher Jean Buridan de Bethune, who was responsible for “the virtual creation of the modern [Austrian] theory of money.” As Rothbard explains:

Foreshadowing the Austrians Menger and von Mises, Buridan insisted that an effectively functioning money be composed of a material possessing a value independent of its role as money. . . . Buridan went on to catalogue those qualities that lead the market to choose a commodity as a medium of exchange . . . portability, high value per unit weight, divisibility, and durability.

In short, a sophisticated commodity theory of money. This served the additional function of beginning to sever monetary theory from the Aristotelian notion of money as a unique creation of the state, barren of intrinsic value, that plagued early economic considerations, and formed the basis of the early Christian prohibitions on interest.

It is most informative to note that there were in fact modern general treatises on economics that preceded Adam Smith, the most important being Essai Sur La Nature Du Commerce En General, by the “gallicized Irish merchant” Richard Cantillon. Cantillon was sound on his analysis of market pricing, providing a sophisticated discussion of consumer demand coupled with supply. He was “the first to stress and analyze the entrepreneur.” Cantillon’s work pioneered “spatial economics . . . the analysis of economic activity in relation to geographic space.” Most importantly, all of this was done some 70 years before Adam Smith, the alleged father of economics.

The subject of Adam Smith is where Rothbard will perhaps raise the most eyebrows. He is almost without exception hostile, deeming Smith a proto-Marxist, and, following Schumpeter, an obstacle for the development of sound economic theory. For Rothbard, Smith interjected the labor theory of value into economics and pioneered an extreme variant of the egalitarianism that plagues political dialogue to this day. Contrary to conventional wisdom, Rothbard holds that even Smith’s famous “invisible hand” was not original, and that Smith’s emphasis on the division of labor neglected the importance of specialization in the economy as a whole. In the wake of Rothbard’s dissection, laissez-faire promoters of Adam Smith have a lot of explaining to do.

Rothbard’s book also serves as a history of the development of natural law theory, a discussion which moves from Aristotle through to modernity. Notable again is the emphasis on the positive role played by Christianity, and Catholicism in particular, on the emergence of a coherent natural rights-based libertarian doctrine. As the author points out, the Catholic professor at Bologna, Huguccio, in his Summa of 1188, established the doctrine that “private property was to be considered a sacrosanct right derived from the natural law.” In theory, private property was to be immune from the aggressions of the state.

This analysis leads to an interesting reinterpretation of more well known proto-libertarian natural rights theorists like John Locke. In the case of Locke, Rothbard regards his theory as “neo-Scholastic Protestantism,” a resurrection of previously held Christian doctrine regarding the natural law. Of course, there were radical innovations within the Lockean system, most importantly with regard to social contract theory. But the author’s point is extremely important, and must lead to a reconsideration of the religious roots of the doctrines of political freedom.

Further, Professor Rothbard takes the reader through an in-depth analysis of the social ramifications of the Protestant Reformation, and of the great theological divides in Europe. There is an extensive survey of Mercantilism in theory and practice. The Enlightenment comes under scrutiny for its mysticism and perversion of libertarian doctrine. No essential subject in economic or political theory is left untouched.

This is an immensely important work, a judgment that must be reserved for a select number of titles. As a fresh history of economic theory it is invaluable. As a learned analysis of the roots of libertarian thought, it is revolutionary. This is a book that deserves to be read carefully and repeatedly. []

Mr. Pavlik is director of The Freeman Op-Ed Program at The Foundation for Economic Education.